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High Deductibles instead of Bonus-Malus: Can it Work?

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  • Lemaire, Jean
  • Zi, Hongmin

Abstract

Holtan (1994) suggests to replace traditional bonus-malus systems by a high deductible financed by a short-term loan. Practical consequences of this proposal are investigated here. Simulation is used to evaluate the efficiency of the Taiwanese Bonus-malus system and the variability of premiums of an average policyholder. Holtan's high deductible system is analysed under a compound Poisson assumption, with truncated exponential claims. It is shown that the introduction of a high deductible would increase the variability of payments and the efficiency of the rating system for most policyholders.

Suggested Citation

  • Lemaire, Jean & Zi, Hongmin, 1994. "High Deductibles instead of Bonus-Malus: Can it Work?," ASTIN Bulletin, Cambridge University Press, vol. 24(1), pages 75-86, May.
    • Handle: RePEc:cup:astinb:v:24:y:1994:i:01:p:75-86_00
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    Cited by:

    1. Maria Mercè Claramunt & Maite Màrmol, 2020. "Refundable deductible insurance," Working Papers hal-02909299, HAL.
    2. Olena Ragulina, 2017. "Bonus--malus systems with different claim types and varying deductibles," Papers 1707.00917, arXiv.org.
    3. Marius Dan Gavriletea & Aura Carmen Moga, 2011. "Romanian Compulsory Motor Third Party Liability Insurance In 2010 And The Predictable Future," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(13), pages 1-9.

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